Cryptocurrency Scams Revenue Hit $1.6 Billion In July 2022

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Cryptocurrency Scams Revenue Hit $1.6 Billion In July 2022

According to recent Chainalysis data, the total revenue from bitcoin scams for 2022 is currently $1.6 billion, which is 65% less than where it was until the end of July 2021. According to Chainalysis, the cause of the reduction appears to be related to falling exchange rates across different currencies.

Since prices have been falling rapidly since the beginning of the year, it is not a surprise that the cryptocurrency market has had a difficult few months. As investors choose to less risky assets in an effort to protect their money, we have seen record levels of depreciation in numerous sectors this year alone, including the decentralized finance and non-fungible token (NFT) sectors.

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The report’s author and cybercrimes research head at Chainalysis, Eric Jardine, notes that bull markets, when investment prospects and outsized returns are most alluring to victims, are when frauds on cryptocurrency investors are more likely to succeed. In addition, he proposed that bull markets frequently witness a rise in the number of new, untrained crypto users, who are more vulnerable to scams.

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What you should know

The report explains that cryptocurrency transaction volumes this year for both illicit and legitimate entities are tracking behind 2021 through July. It explains that criminal activity appears to be more resilient in the face of price declines, as illicit volumes are down just 15% year over year, compared to 36% for legitimate volumes.
Though we are seeing some declines in these two subsets, the aggregate data doesn’t tell the whole story. The report explained, “If we dig into specific forms of cryptocurrency-based crime, we find that some have actually increased in 2022, while others have declined more than the market overall.”
The report also confirmed that there is a direct correlation between the price of Bitcoin and the fall in the scam revenue, which may be due to investors getting more educated and smarter with their money or that there is significantly less participation in the market because the rate of return as significantly dropped when compared to last year. The report reveals that the latter is the case for 2022.
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Cryptocurrency Scams Revenue Hit $1.6 Billion In July 2022
The report reads, “Since January 2022, scam revenue has fallen more or less in line with Bitcoin pricing. And as we see on the chart below, it’s not just scam revenue falling — the cumulative number of individual transfers to scams so far in 2022 is the lowest it’s been in the past four years. Those numbers suggest that fewer people than ever are falling for cryptocurrency scams. One reason for this could be that with asset prices falling, cryptocurrency scams — which typically present themselves as passive crypto investing opportunities with enormous, promised returns — are less enticing to potential victims.”
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The report then further explained that a lot of inexperienced users of cryptocurrency are no longer interested in the market. It reads, “We also hypothesize that new, inexperienced users who are more likely to fall for scams are less prevalent in the market now that prices are declining, as opposed to when prices are rising and they’re drawn in by hype and the promise of quick returns.”
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The report ranks the top three scams of 2022 so far, which are, Juicy Fields, which has received a total of $273.94 million, Unique Exchange, which accounts for a total of $267.50 million and Omega Pro, which accounts for $106.45 million.
When compared to the biggest scam of 2021, which was Finiko, which received a total of $1.16 billion, the biggest scam of 2022 so far has netted just 24% of Finiko’s revenue through the end of July in 2021.
The report explained that since total scam revenue in a given year is so often driven by one or two huge scams, it’s possible an outlier could emerge or be identified before the end of the year and reverse the trend of declining scam revenue that we currently see.

Cryptocurrency Scams Revenue Hit $1.6 Billion In July 2022
Though we are seeing a decline in scam revenue, it is important to remember that as at July 2022, $1.9 billion worth of cryptocurrency has been stolen in hacks of services, compared to just under $1.2 billion at the same point in 2021, a 58.33% increase.
This trend doesn’t appear set to reverse any time soon, with a $190 million hack of cross-chain bridge Nomad and $5 million hack of several Solana wallets already occurring in the first week of August.

The report concluded by stating, “we shouldn’t expect theft to drop based on cryptocurrency market movements the way scamming does — as long as crypto assets held in DeFi protocol pools and other services have value and are vulnerable, bad actors will try to steal them. The only way to stop them is for the industry to shore up security and educate consumers on how to find safe projects to invest in. Law enforcement, meanwhile, must continue developing their ability to seize stolen cryptocurrency to the point that hacks are no longer worthwhile.”

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